TALLAHASSEE — After a decade-long legal fight, the Florida Supreme Court on Thursday ruled that Expedia and other online travel concerns don’t have to charge hotel tax on the fees they charge when customers use them to book rooms.
The state’s highest court sided with the businesses against Alachua and sixteen other Florida counties – including Hillsborough, Pasco and Pinellas – who argued that they were losing millions in tax money.
In a 5-2 decision, the court said the tourism development tax counties get from hotel guests should apply only to the amount actually paid for the stay and not for the service used to book that stay.
“It is irrelevant to the taxation issue at hand which actors are involved and what roles they play in transactions for facilitating hotel room reservations,” the opinion said.
The majority opinion said state lawmakers knew of the taxing dispute for years and chose to do nothing about it.
Their inaction “reflects the Legislature’s willingness to maintain the status quo of not subjecting” online travel companies’ fees to being taxed, the decision said.
The stakes are high not just in Florida but across the country, where similar suits on online booking services and hotel taxes are in the courts.
The Center for Budget and Policy Priorities, a Washington-based think tank, estimated in a 2011 study that local and state governments were taking in $275 million to $400 million less in tax revenue yearly.
Florida was losing out on $31 million to $45 million a year, the study found.
Expedia, now the country’s biggest travel company, has been engaged in similar tax battles in tourist-heavy states like California and Hawaii.
The Bellevue, Washington-based company recently acquired Travelocity and also operates Hotels.com and Hotwire.
They don’t always win. The Hawaii Supreme Court ruled in March that Expedia and others owed millions of dollars in back taxes for booking rooms there.
Two justices joined in disagreeing with the Florida ruling: R. Fred Lewis and Ricky Polston, who often find themselves on opposite sides of a decision.
Lewis, writing in dissent, said nothing in the law allows the tax to “be divided up such that the (tax) is levied on only a portion of the transaction.”
Business interests immediately applauded the ruling. Bill Herrle, Florida executive director of the National Federation of Independent Business, said the ruling was a victory for the state’s tourism industry.
“We can’t raise taxes on tourists considering a trip to Florida and expect it not to make an impact,” he said.
Grover Norquist, president of Americans for Tax Reform, summed up the business world’s agitation against the tax.
“If you’re not a hotel, you shouldn’t have to pay hotel bed taxes,” he said. “We can’t create new taxes on consumers if we want to promote businesses and jobs.”